The US Treasury Department announced a new phase of sanctions targeting Iran with Operation Economic Outcast, adding digital assets to the list of affected sectors. The move, revealed on August 24, broadens the scope of secondary sanctions, impacting not only traditional industries such as technology, gold, aviation, and shipping but also the digital asset sector. Secretary Scott Bessent stated that the initiative aims to “sever every economic lifeline that sustains this tyrannical regime until Tehran stands alone.” The Treasury further asserted its intent to be “uncompromising in targeting any source of the regime’s illicit revenue.”
Uncertainty for Decentralized Infrastructure
Despite the expansion of sanctions, the Treasury did not specify whether decentralized blockchain infrastructure would become a target. Peter Van Valkenburgh, executive director of Coin Center, a nonprofit research and advocacy organization focused on cryptocurrency policy, raised concerns about this ambiguity during an appearance on the Uneasy Money podcast.
Van Valkenburgh highlighted that the recent Treasury action designated several companies, exchanges, and individuals accused of crypto-related crimes, but refrained from naming any decentralized protocols. “The release is fairly neutral,” he remarked, explaining that it references digital assets and intermediaries as potential subjects of secondary sanctions without additional detail.
He questioned how the government will interpret and act on such broad language. Van Valkenburgh expressed his view that enforcement should focus on custodial actors such as Iranian exchanges, front companies, brokers, and money networks that hold direct control over funds and have knowledge of their clients.
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Mini dictionary: Coin Center, a nonprofit based in the United States, specializes in public policy research and advocacy related to cryptocurrencies and decentralized technologies.
Legal Safeguards and Developer Protections
During the discussion, Van Valkenburgh noted that US sanctions law contains protections for information and informational materials under the Berman amendment. This legal provision, added to the International Emergency Economic Powers Act and the Trading with the Enemy Act in the late 1980s and expanded in 1994, prevents the government from using sanctions authority against expressions of information—regardless of format.
“Our sanctions laws actually have a pretty clear carve-out,” Van Valkenburgh said, describing it as a bar on using sanctions powers against information, emphasizing that the law protects writing and publishing software even if the software is later used for transactions.
He acknowledged this argument is not new for Coin Center but remains under-discussed more broadly. Van Valkenburgh clarified that his position does not rest on the premise that all blockchain transactions are simply information immune to regulation. Rather, he said, the act of creating and sharing software itself constitutes protected conduct.
He anticipates challenges to this interpretation as high-profile cases, such as the retrial of Tornado Cash developer Roman Storm, move forward. These cases touch on the boundaries of free speech and software development under the lens of sanctions law.
Compliance in the Crypto Ecosystem
Van Valkenburgh said the compliance mechanisms the Treasury would seek are already found at the edges of the crypto market. Stablecoin issuers and application front ends like Uniswap have implemented sanctions compliance measures. He noted that Circle and Tether, two major stablecoin issuers, also engage in such practices, though he lacks insider information on their compliance specifics. Additionally, the transparency of public blockchains allows sanctioned flows to be monitored in real time, minimizing the necessity for non-public enforcement efforts.
He argued that a sustainable approach would be for US authorities to recognize that decentralized technologies cannot be regulated out of existence. By focusing oversight on entities where human intervention occurs, the government can maintain effective control without stifling technological development.
Emphasizing the need for pragmatism, Van Valkenburgh suggested, “The durable approach is also the one that favors the United States: embrace that these new technologies exist, accept that they can’t be regulated out of existence, and instead find as many paths to legitimize the businesses building on top of these networks as possible.”
Despite these debates, neither the Treasury’s press release nor the accompanying sectoral determination clearly define what constitutes activity in the digital asset sector, leaving room for interpretation and future policy evolution.
